Polygon AB. Annual Report and Consolidated Financial Statements

Transcription

1 Polygon AB Annual Report and Consolidated Financial Statements For the fiscal year 2014 Z

2 Contents Directors report 3 Group financials reports 5 Consolidated income statement 5 Consolidated statement of comprehensive income 5 Consolidated Balance sheet 6 Consolidated statement of cash flow 7 Consolidated statement of changes in equity 8 Corporate Governance Report 9 Notes 11 Note 1 Company information 11 Note 2.1 Basic accounting principles 11 Note 2.2 Changes in accounting principles 12 Note 2.3 Summary of important accounting principles 12 Note 2.4 Significant accounting judgments, estimates and assumptions. 16 Note 3 Business combinations 17 Note 4 Discontinued operations 18 Note 5 Segment reporting 18 Note 6 Expenses by category 19 Note 7 Wages and salaries to employees and other remuneration and fees 19 Note 8 Finance revenue and costs 20 Note 9 Taxes 20 Note 10 Goodwill 21 Note 11 Intangible assets 22 Note 12 Impairment testing of goodwill and trademarks 23 Note 13 Property, plant and equipment 23 Note 14 Financial instruments and financial risk management 24 Note 14.1Interest-bearing loans and borrowings 26 Note 14.2 Cash and cash equivalents 27 Note 14.3 Accounts receivables 27 Note 14.4 Prepaid expenses and accrued income 28 Note 14.5 Pledged assets for own liabilities and provisions 28 Note 14.6 Financial lease liabilities 28 Note 14.7 Operational lease contracts 29 Note 14.8 Other liabilities 29 Note 15 Issued capital 29 Note 16 Pension provisions 30 Note 17 Accrued expenses and prepaid income 32 Note 18 Contingent liabilities 32 Note 19 Related parties disclosures 32 Note 20 Adjustments to reconcile profit before tax to net cash flow 32 Note 21 Events after the reporting period 32 Parent company financials reports 33 Income statement, parent company 33 Statement of Total Comprehensive income 33 Statement of financial position, parent company 34 Pledged assets and contingent liabilities 34 Cash flow statement for parent company 35 Changes in equity, Parent company 35 Notes to the Parent Company s financial statements 36 Note 1 Basis of preparation 36 Note 2 Distribution of sales 36 Note 3 Wages and salaries to employees and other remuneration fees 36 Note 4 Audit fee 36 Note 5 Other operating costs 36 Note 6 Financial income and expenses 36 Note 7 Taxes 36 Note 8 Participation in Group Companies 36 Note 9 Long-term Receivables Group companies 37 Note 10 Accrued expenses and prepaid income 37 Note 11 Pledged assets 37 Note 20 Related parties disclosures 37 The Board and Chief Executive Officer s signatures 38 2

3 Directors report The Board of Directors and the Managing Director of Polygon AB (publ), org.no , hereby present the Annual Report and Consolidated Financial Statements for the fiscal year Operations Polygon AB and its subsidiaries primarily perform services in water and fire damage restoration and also offer other services such as temporary humidity control, leak detection, odour elimination and moist investigations. The customers of Polygon are insurance companies, as well as commercial and private property owners. The Polygon Group conducts business in Europe, North America and Asia with its approximately 300 service depots providing a strong local presence. The main strengths of Polygon are short reaction times and efficient technology. Polygon creates value by minimizing costs for the extent of the damage, and its handling, as well as a professional and secure claim processing involving the insured. In April 2014 Evert Jan Jansen was appointed CEO and managing director of the Polygon group. The Polygon Group was established at the end of September 2010 when Polygon AB acquired 100% of the shares in the listed Munters Division MCS (Moisture Control Services) from the listed company Munters AB. The parent company, Polygon AB was formed 24 August Ownership structure Polygon AB is owned by Polygon Holding AB which in turn is owned by MUHA No 2 LuxCo. Financial Year 2014 The group sales amount to (423.4) MEUR for the financial year and the operating loss amounts to 1.1 (1.3) MEUR. The operating loss was charged with 7.2 (9.6) MEUR by non-recurring items. EBIT Amortization Intangible assets Non-recurring items Adjusted EBITA EBITA-margin 2.8 % 3.4 % Depreciations Adjusted EBITDA EBITDA-margin 4.9 % 5.8 % Non-recurring items mainly refers to changes in management and restructuring of service depots and for 2013 also gains on sales of buildings and write-downs of IT systems.. During the year, the group has acquired a company in Austria, but no divestments have been made. The income statement and balance sheet have changed since the publication of Interim report Q dated 24 February 2015 due to degraded margin in an ongoing project in the US. This has affected EBIT negative with 1.9 MEUR but no negative effects on the cash flow from operating activities. Financing and liquidity The group s earlier bank financing was replaced in April 2014 with a Senior Secured Floating Rate Note of 120 MEUR, which is due 2019 and applies a floating rate calculated on 500 basis points on three-month EURIBOR. Liquid funds amounted to 21.5 (15.8) MEUR as of 31 December The cash flow from the 2014 operating activities amounts to 10.0 (28.1) MEUR. The major difference between the years in cash flow from operating activities is the improvement in the working capital that occurred during Investments The group s capital expenditures on property, plant and equipment amount to 9.2 (8.0) MEUR. In addition to this the group has further developed its business systems amounting to 2.7 (1.5) MEUR. Total depreciations during the period amount to 14.5 (16.1) MEUR, of which 8.8 (10.0) MEUR is attributable to fixed assets and 5.7 (6.1) MEUR to intangible assets. Depreciation of intangible assets mainly refers to order backlog and customer relations in combination with acquisitions and depreciations on balanced costs for developing the Group s business systems. During the year tangible assets were written down for a book value of 0.5 MEUR. Employees The average number of employees in the Group during the 2014 financial year was (2 743). Significant risks and uncertainty factors Polygon is a leader in quality and technology with a strong brand and complete service offering. A wide local presence on geographically spread-out markets provides strength. The risks consist of revenues that vary due to weather and temperature with related damage frequency, as well as a relatively fixed cost structure. The operation also has a large exposure against the insurance industry, which leads to an interdependence. The competition comes from a couple of global operators, but mainly from a large number of small, local operators. Financial risks Polygon is exposed to a number of financial risks; market risk (currency risk and interest risk), credit risk and liquidity risk. Currency risk The groups currency exposure is divided into transaction exposure (exposure in foreign currency related to contractual cash flows) and translation exposure (equity in foreign subsidiaries). The currency exposure arises from intercompany financing along with translation of foreign subsidiaries income statements and balance sheets to the groups currency (EUR). 3

4 The currency risk relates to currency changes that could affect the group profit and loss negatively. The translation exposure primarily relates to translation from Swedish and Norwegian kronor, Canadian and American dollars, as well as British pounds. Interest risk The interest risk is related to market rate changes that could affect the cash flow, the profit or loss, and/or the fair value of financial assets or liabilities. At the year-end the group had no hedging products to minimize the risk exposure (last year an average of 79% of the group s financial liabilities were hedged with interest swaps. Liquidity risk The liquidity risk relates to the ability of the group to meet short term payment commitments. The group works with business ratios and forecasts to handle the fluctuations that are expected in the liquidity. Environment Polygon s operations are not subject to permit and notification according to existing environmental legislation. Corporate Governance Report According to Swedish Annual Accounts Act chapter 6 8, the Corporate Governance Report is published outside director s report. Proposed disposition of earnings Proposed disposition for the parent company s earnings: The Board of Directors and the Chief Executive Officer propose that the net profit of EUR together with retained earnings of EUR, which total EUR, be carried forward to new account.. Credit risk The credit risk relates to the risk that counterparty in a transaction does not fulfil his or her obligations according to the agreement and that a possible security does not cover the groups receivable. For the group s commercial counterparts where there is a larger exposure, an individual investigation into credit ratings is performed. The group is regularly trying to shorten the effective period of credit. The credit risk is limited since no individual customer exceeds 5% of the group s total revenue. The credit risk is disbursed both geographical and due to many customers. Parent company Polygon AB s business includes common group functions as well as owning and managing shares in group companies. Polygon AB had 5 (4) employees during No investments were made during the year. The result before tax amounts to 6.5 (2.2) MEUR. Liquid funds at period end amount to 14.5 (10.2) MEUR. The parent company s assets amount to (88.2) MEUR and equity 93.5 (87.0) MEUR. During 2014 the company made a bonus issue of 52 TEUR. Subsequent events On 12 January 2015, Lucas Hendriks was appointed the new Chairman of the Board. One minor company acquisition was made in January in the United Kingdom. The company s assessment is that nothing else significant has occurred after the balance sheet date. Future prospects Polygon is working according to its strategic plans and the expectations of the group are that the market positions will be strengthened through organic growth, acquisitions and improvement of efficiency. Research and development The research and development in the group concerns products and services in the existing field of activities. 4

5 Group financials reports Consolidated income statement T Note Sale of services 5 419, ,361 Cost of sales , ,360 Gross profit 99, ,001 Selling and distribution costs ,424-92,512 Other operating income 6 1,785 1,578 Other operating costs 6-10,062-10,373 Operating income -1,098-1,306 Finance income Finance costs 8-11,763-12,570 Income before tax from continuing operations -12,622-13,701 Income taxes 9 2,100 3,206 Net income for the year -10,522-10,495 The income statement has been changed since the publication of the Interim report for Q dated 24th of February For further information see note 2.1 regarding accounting principles. Consolidated statement of comprehensive income T Note Net income for the year -10,522-10,495 Consolidated statement of comprehensive income 19 Items that can not be reclassified to profit or loss Actuarial gains and losses on defined benefit plans -1, Income tax effect on Actuarial gains and losses on defined benefit plans Items that later can be reclassified to profit or loss Cash flow hedges Income tax effect on Cash flow hedges Exchange differences on translation of foreign operations Total comprehensive income for the year, net of tax -11,408-9,455 Net income for the year Attributable to owners of the company -10,657-10,513 Attributable to non-controlling interest Total -10,522-10,495 Total comprehensive income for the year Attributable to owners of the company -11,543-9,473 Attributable to non-controlling interest Total -11,408-9,455 5

6 Consolidated Balance sheet T Note ASSETS Non-current assets Goodwill , ,961 Other intangible assets ,772 56,610 Property, plant and equipment 13 27,103 27,298 Deferred tax assets 9 22,777 19,914 Total non-current assets 206, ,783 Current assets Work in progress 16,498 12,422 Account receivables 14 67,705 68,657 Receivables from parent company 71 - Current tax receivables Other current financial assets 2,018 1,373 Prepaid expenses 14 4,068 3,737 Cash and cash equivalents 14 21,509 15,789 Total current assets 112, ,767 TOTAL ASSETS 318, ,550 T Note EQUITY AND LIABILITIES Equity 15 Issued capital 58 6 Other contributed capital 6,771 6,771 Other capital reserves Retained earnings 34,789 47,014 Equity attributable to owners of the parent company 41,351 52,894 Non-controlling interests 1,094 1,024 Total equity 42,445 53,918 Non-current liabilities Post-employment benefit provisions 16 5,546 4,653 Other provisions Deferred tax liabilities 9 23,921 24,928 Long-term interest-bearing liabilities , ,308 Total non-current liabilities 205, ,416 Current liabilities Advance payments from customers Post-employment benefit provisions Other provisions Account payables 14 34,168 33,923 Short-term interest-bearing liabilities 14-9,637 Other liabilities 14 10,642 10,913 Accrued expenses 17 24,570 20,349 Current income tax liabilities Total current liabilities 71,161 77,216 TOTAL EQUITY AND LIABILITIES 318, ,550 Pledged assets and contingent liabilities are stated in 14.5 and 18. The balance sheet has been changed since the publication of Interim Report Q4 dated 24th of February For further information see note 2.1 Accounting principles. 6

7 Consolidated statement of cash flow T Note Operating activities Income before taxes -1,098-1,306 Adjustments for non cash items before tax 20 15,319 19,612 Financial income received Income tax paid -1,452-1,463 Cash flow from operating activities before changes in working capital 13,008 16,995 Cash flow from changes in working capital: Changes in operating receivables 537 4,648 Changes in work in progress -3,929 6,658 Changes in operating liabilities Cash flow from operating activities 9,975 28,115 Investing activities Acquisition of a subsidiary, net of cash acquired Purchase of property, plant and equipment 13-9,180-6,492 Purchase of intangible fixed assets 11-2,696-1,554 Sale of fixed assets 467 1,870 Net cash flows used in investing activities -11,933-6,376 Cash flows from financing activities New borrowings 120,000 16,000 Repayment of borrowings -103,963-9,285 Utilization of overdraft - -13,364 Dividend to non-controlling interest Financial costs paid -7,697-8,083 Net cash flows from financing activities 8,274-15,054 Cash flow for the year 6,315 6,685 Cash and cash equivalents, opening balance 15,789 10,396 Translation difference in cash and cash equivalents ,292 Cash and cash equivalents, closing balance 21,509 15,789 7

8 Consolidated statement of changes in equity T Attributable to the owners of the company Share capital Other contributed Other capital capital reserved Retained earnings Noncontrolling interest Total equity 2014 Total Closing balance, December ,771-1, , ,818 1, ,148 Dividend to shareholders Unconditional shareholder contribution ,451-52, ,775 Net income for the year ,513-10, ,495 Other comprehensive income 1) ,040-1,040 Closing balance, December , ,014 52,894 1,024 53,918 Grace issue Dividend to shareholders Net income for the year ,657-10, ,522 Other comprehensive income 1) , Closing balance, December , ,789 41,351 1,094 42,445 1) See note 15. 8

9 Corporate Governance Report Polygon AB (publ) has prepared this Corporate Governance Report in accordance with Chapter 6 of the Swedish Annual Accounts Act. Polygon AB is a Swedish company whose business involves conducting consulting and service operations within water and fire remediation and compatible operations, directly and/or indirectly through holdings in other companies. Polygon AB s bonds are listed on the Corporate Bond List of NASDAQ OMX in Stockholm. Share capital and shareholders Polygon AB has 5,600 outstanding shares. Each share confers one vote on the holder. There is no limit on the number of shares that may be represented by a single shareholder at the Annual General Meeting. Polygon AB is a wholly owned subsidiary of Polygon Holding AB, 89.02% of which is owned by MUHA 2 Luxco. General Meetings The General Meeting is the Company s highest decisionmaking body. At General Meetings, shareholders exercise their right to vote by appointing the Company s Board of Directors and auditors and adopting principles for remuneration to the Company s Board of Directors, management and auditors. If applicable, the General Meeting also passes resolutions regarding the Articles of Association, dividends and changes to the share capital. At the General Meeting that is to be held within six months of the end of the financial year, the income statement and balance sheet should be adopted and any profits be appropriated, and it should be resolved whether to discharge the Board and the Managing Director from liability for the past financial year. There are no limits on the number of votes that may be cast by each shareholder in a General Meeting. The General Meeting has not authorised the Board of Directors to issue shares or purchase own shares. Operational governance The Managing Director is also the CEO and responsible for the operational governance of the Group, and together with certain Business Unit Managers, the Chief Financial Officer, the VP Operations, the VP Commercial and the VP Human Resources, he forms the group management. Polygon AB has a decentralised organisation. This is an intentional strategic choice, based on the fact that the business tends to be local as well as the conviction that the best decisions are made locally. The Group s business organisation is based on the decentralisation of responsibilities and powers in combination with a fast and well-functioning reporting and control system. There are written instructions for the managing directors of the subsidiaries. Furthermore, the operations are regulated by a number of policies and instructions, such as the Code of Conduct. Much of the communication and discussions within the group is based on the internal financial reporting. Monthly accounts are prepared for each internal profit centre. In addition to the income statement and the balance sheet, these monthly accounts contain key ratios and other relevant information. In connection with the monthly accounts, meetings are held with the managements of the subsidiaries. Group interim statements are presented to the market on a quarterly basis. Internal control According to the Swedish Companies Act, the Board of Directors is responsible for the internal control of the company with regard to financial reporting. With regard to financial reporting, the internal control is intended to create reasonable assurances and reliability in relation to the external financial reporting, which comprises the annual and quarterly reports. The internal control is also intended to provide reasonable assurances that the financial reporting is prepared according to the law and applicable accounting standards and other requirements related to listed companies. Control environment The allocation and delegation of responsibilities have been documented and communicated via internal documents that govern the Board of Directors and the Company, such as the formal work plan of the Board of Directors, the instructions to the CEO, the delegation of powers, the authorisation instruction and other internal governance documents, such as the accounting handbook. The Audit Committee, which comprises two board members, shall ensure compliance with accounting and internal control principles and that the requisite contacts with the company s auditors are upheld. All internal governance documents are updated regularly for compliance with changes in legislation or accounting standards. Risk assessment In accordance with its formal work plan, the Board of Directors carries out a review of the internal control once per year. Existing risks are identified, and measures are adopted to mitigate such risks. The auditor is invited to present the audit procedures related to internal control in an Audit Committee meeting. Control activities As the Company s accounting system is designed to ensure that the signing of agreements and the payment of invoices, etc., comply with the decision paths, signatory powers and authorisation powers provided in the internal governance documents, there is basically a control structure in place to counteract and prevent any risks identified by the Company. In addition to these control structures, there are a number of control activities intended to discover and correct errors and deviations. Such control activities include follow-up at various levels of the organisation, such as the follow-up and reconciliation of resolutions passed by the Board of Directors; the review and comparison of profit/loss items; the reconciliation of accounts; and the approval and reporting of business transactions in the accounting department. 9

10 Information and communication Polygon has established an organisation to ensure that the financial reporting is correct and efficient. The internal governance documents clarify the allocation of responsibilities, and the daily interaction between different departments ensures that any relevant information and communication reaches all parties concerned. On a weekly and monthly basis, the Group management receives financial information about the Company and its subsidiaries regarding the development of future investments and liquidity planning. The Company s information policy safeguards that any information provided, externally and internally, is correct and provided at a time that is suitable in each case. Follow-up There is regular follow-up at all levels of the organisation. The Board of Directors regularly evaluates the information provided by the management and the auditors. In addition, the Board of Directors follows up annually on the risk assessment and any agreed measures. The Board of Director s supervision is of particular importance for the development of internal controls and to ensure that measures are implemented to address any shortcomings and proposals that have emerged. 10

11 Notes Note 1 Company information This consolidated financial statement includes the parent company Polygon AB, org. no , and its subsidiaries. The postal address of the head office is Sveavägen 9, Stockholm. Polygon AB is a fully owned subsidiary of Polygon Holding AB, org. no , based in Stockholm, Sweden, which in turn is owned by MUHA No 2 LuxCo. The financial statements refer to Polygon AB and have been approved by the Board of Directors in connection with the board meeting on 15 April Note 2.1 Basic accounting principles The income statement and balance sheets differ from information published earlier in the year-end report dated 24 February 2015, due to reduced margins in an ongoing project. This has negatively affected operating loss by 1.9 MEUR and loss for the year by 2.0 MEUR. Accounting principles The consolidated financial statements for the 2014 fiscal year have been prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB), and the interpretation statements issued by the International Financial Reporting Interpretations Committee (IFRIC) as approved by the European Commission for application within the EU for fiscal years beginning 1 January In addition the Swedish Financial Reporting Board (RFR): Supplementary Accounting rules for Groups have been applied. The parent company applies the same accounting principles as the group, with the exception of those cases specified in the section, The parent company s accounting principles. Reporting currency The reporting currency of the group is euro, which is the parent company s functional currency. Unless otherwise stated, all amounts are in stated in thousands of euros ( TEUR ). Reporting period The reporting period is fiscal year 1 January 2014 until 31 December 2014, with all closing lines for this period being 31 December The previous fiscal year was 1 January 2013 until 31 December 2013, with closing lines of 31 December Basis of preparation of the financial statements The consolidated financial statement has been prepared based on the assumption of going concern. Assets and liabilities are recorded at historical cost with the exception of derivative financial instruments and acquisition earn-outs, which are recorded at fair value. Basis of consolidation The consolidated financial statement covers the parent company and its subsidiaries. The financial statements of the parent company and the subsidiaries that are a part of the consolidated financial statement refer to the same period and are prepared in accordance with the same accounting principles. All inter-company items are eliminated as a whole and are consequently not included in the consolidated financial statement. Subsidiary A subsidiary is a company where the parent company owns more than 50% of the shares or controls the subsidiary in another way. Subsidiaries are included in the consolidated financial statement from the date on which the group obtains control of them and until the date when such control ceases. Associated company An associated company is a company where the group has substantial influence and is not a subsidiary or a joint venture. Participations in associated companies are recorded in accordance with the equity method. At the moment there are no associated companies in the group. Non-controlling interest Non-controlling interest is part of the profit and loss and the net assets in non-wholly owned subsidiaries which fall to other owners instead of the parent company s shareholder. Its share of net profit is included in the net profit of the group and the net assets are included in the group s equity. Translation of foreign subsidiaries financial statements Foreign subsidiaries are translated to euro since this is the presentation currency of the group as well as Polygon AB s functional currency. Income statements are translated to an average exchange rate and the balance sheet is translated to the closing rate of exchange. All surplus values recorded in connection with an acquisition of a foreign subsidiary, such as goodwill and other previous non-recorded intangible assets, are considered as respective entities and are therefore translated to the closing rate of exchange. Translation differences are recorded in other comprehensive income. In case of a disposal of a subsidiary, accumulated translation differences are reversed in the income statement. The following rates have been applied regarding foreign currency translation: T Closingbalance rate Average rate Closingbalance rate Average rate Dec Dec CAD 0,7062 0,6825 0,6790 0,7314 CHF 0,8315 0,8234 0,8155 0,8123 DKK 0,1343 0,1341 0,1340 0,1341 GBP 1,2757 1,2413 1,2001 1,1777 NOK 0,1105 0,1198 0,1183 0,1283 SEK 0,1051 0,1099 0,1118 0,1156 SGD 0,6207 0,5950 0,5737 0,6019 USD 0,8209 0,7539 0,7278 0,

12 Gross accounting Gross accounting is consistently applied regarding accounting of assets and liabilities with the exception of cases when a receivable and a liability exist against the same counter party and Polygon possesses the legal opportunity of offsetting these and also intends to do so. Unless otherwise stated, gross accounting is also applied regarding revenues and costs. Classification of assets and liabilities Fixed assets, long-term liabilities and provisions are expected to be recovered or fall due more than 12 months after closing day. Current assets and current liabilities are expected to be recovered or fall due within 12 months from closing day. Note 2.2 Changes in accounting principles IFRS that entered into force in the financial year 2014 according to the EU The IFRS standards that entered into force in the financial year that began on 1 January 2014 that affected the Group are part of the group package, consisting of IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and changes to IAS 27 Separate Financial Statements. IFRS 10 has introduced a single consolidation model based on control for all companies, regardless of whether a company is controlled through the owners' voting rights or through other contractual arrangements. The new model has not brought about any changes in the classification of subsidiaries. IFRS 12 introduces several new disclosures regarding the composition of the Group and potential restrictions on consolidated assets and liabilities. The applicable disclosures for the Group are provided in Note 2.3 IFRS that will enter into force after 2014 according to the EU A number of new or amended IFRS will not enter into force until in the coming financial year and have not been applied in advance in the preparation of these financial statements. The IFRS that are expected to or may have an impact on the Group's financial statements are described below. IFRS 15 Revenue from Contracts with Customers This standard will enter into force on 1 January 2017 and will then replace all previously issued standards and interpretations relating to revenue from customer contracts (i.e. IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, SIC 31 Revenue Barter Transactions Involving Advertising Services). Accordingly, IFRS 15 includes a collective model for all revenue recognition. The EU has not yet approved this standard. In the coming year, the Group will initiate the work to evaluate how IFRIC 15 will affect the Group's financial statements. IFRS 9 Financial Instruments This standard enters into force on January 2018, when it will replace IAS 39 Financial Instruments: Recognition and Measurements. Various parts of the new standard have been reworked; one part that relates to the classification and measurement of financial assets and financial liabilities, one part that relates to hedge accounting and one part that relates to impairment of financial assets. The EU has not yet approved this standard. In the coming year, the Group will initiate the work on evaluating how IFRIC 9 will affect the Group's financial statements. Other novelties adopted by the IASB as at 31 December 2014 are not considered to have any material impact on the Group's financial statements. Note 2.3 Summary of important accounting principles Exchange rate effects Foreign currency transactions denominated in a currency other than the group s functional currency are revaluated at the transaction date. Assets and liabilities denominated in another currency than the group s functional currency are revaluated at balance sheet date. Any exchange rate differences are recognized in the income statement. Receivables and liabilities in foreign currency Receivables and liabilities valued in foreign currency have been revaluated at balance sheet date. Any operating profit or loss arising from exchange rate differences is recognized in the operating income. Exchange rate differences related to financial assets and liabilities are recognized in the net financial income. Intangible assets An intangible asset is an identifiable non-monetary asset that lacks physical substance. Intangible assets that are identified and valued separately from goodwill through an acquisition mainly consist of marketing, customer, contractual and/or technical related assets. Typical marketing and customer related assets are brands and customer relations. Customer and customer contractual relations come from expected customer loyalty and the potential cash flow that arise during these assets useful life. The acquisition cost of these intangible assets consists of the fair value at the time of acquisition, calculated according to established valuation methods. Development expenditures are recognized as an intangible asset only if it is probable that the development project will generate an economic benefit in the future, and the cost of the asset can be reliably measured. The cost of capitalized development expenses includes only expenses directly attributable to the development project. Other internally generated intangible assets are not recognized as assets. Instead, the expenditures are treated as an expense during the period they arise. Separately acquired intangible assets are recognized at cost less accumulated amortization and impairment. All intangible assets are amortized on a straight line basis over their estimated useful lives and reviewed every balance sheet date. Amortization begins when the asset is available to be taken into use. Certain trademarks have an unlimited lifetime and are not amortized at all. 12

13 Depreciation is calculated as follows: Years Depreciation is calculated as follows: Years Patent, licenses and software 3-4 Customer relations 8-10 Trademarks 25 The value of the order book is amortized over a 1-3 month period. Acquisitions and goodwill Acquisitions are recognized according to the purchase method. When an acquisition occurs, the company's assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring costs) are identified and valued at their fair values Should the group pay more than the fair value of recorded net assets, goodwill on consolidation is recognized. Goodwill is continuously valued at cost less accumulated impairment losses. Since it is not possible to individually test goodwill for impairment, it is allocated to one or more cash-generating units, depending on how the goodwill is monitored for internal control purposes. Polygon has distributed the amount of goodwill to three cash-generating units, Nordic & UK, Continental Europe and North America. Goodwill is not amortized, but annually tested for impairment instead. See note 10 and 12. Tangible assets Tangible assets are physical assets used in the group s operations and have an expected useful life exceeding one year. Tangible fixed assets are valued at their acquisition cost and depreciated on a straight-line basis over their estimated useful life. When tangible assets are recognized, any residual value after the depreciable amount has been determined will be taken into account. Should a larger decline in value occur, writedowns may be required in addition to the already established depreciations. Depreciations commence when the asset is ready to be taken into use. Land is not depreciated. A tangible asset is removed from the balance sheet on disposal or when it is not expected to provide economic benefits in the future either by the using it or selling it. Any gains and losses are calculated as the difference between sale proceeds and the accounted value. Profit or loss is recognized in the accounting period when the asset was sold, as additional cost or other income. The assets residual values, useful lives and depreciation methods are reviewed at the end of each financial year and adjusted, if necessary, towards the end of the next accounting period. Usual costs of maintenance and repairs are expensed as incurred, however costs related to significant renewals and improvements are capitalized and depreciated over the remaining useful life of the underlying asset. Improvements in rented premises 4-6 Dehumidifiers and similar equipment 5-6 Buildings Equipment 4-5 Impairment If there are internal or external indicators for the Polygon group that the value of an asset has declined, the asset should be tested for impairment. For goodwill and assets with a useful life which cannot be determined, such impairment testing should be carried through at least annually, whether there is evidence of impairment or not. If an asset cannot be tested separately, it is allocated to a cash-generating unit to which identifiable cash flows can be allocated. An asset or a group of assets (cash generating units) should be written down if the recoverable amount is lower than the recognized value. The recoverable amount is the higher of value in use and net realizable value. Impairment losses are recognized in the income statement. For all assets, except goodwill and intangible assets with indefinite useful lives, whether there are indications that an earlier impairment, in whole or in part, is no longer is justified is determined at the end of each reporting period. If the assumptions underlying the calculation of the asset s or assets recoverable amount has changed, the recognized value of the asset or assets is increased to its recoverable amount. The reversal does not exceed what the company would have recognized, after depreciations, if no impairment were made in the first place. The reversal is recorded in the income statement unless the asset is recognized at revalued amount according to another standard. Goodwill is allocated to different cash-generating units. If the allocation of goodwill cannot be completed before the end of the year the company completed the acquisition, the first allocation should then be carried out before the end of the financial year following the year the acquisition was made. In these cases, amounts relating to non-allocated goodwill and the reason why they have not been allocated should be stated. Impairment of goodwill and intangible assets with indefinite useful life are not reversed. Financial instruments A financial instrument is any type of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in another company. Financial assets The financial assets of the group are divided into four categories: Financial assets at fair value and recorded through profit and loss. Financial assets held for trading. Financial assets initially recognized as an item at fair value ( fair value option ). Loans and receivables valued at amortised cost in accordance with the effective interest method. 13

14 Financial assets held to maturity valued at amortized cost in accordance with the effective interest method. Financial assets for sale valued at fair value and recorded in other comprehensive income. Management initially classifies a financial instrument to one of the four categories above, and classifications are regularly evaluated. The Polygon group has financial assets representing one of the categories above, loan receivables and accounts receivables which are non-derivative financial assets with fixed or determined payments which are non-listed in an active market. They are initially recognized at fair value. These assets are regularly and systematically evaluated in terms of final estimated economic benefits to the company. No financial assets are held to maturity and no financial assets are held for sale. All assets are tested for impairment. If management estimates and considers a write-down to be appropriate, the initial classification is revaluated by the end of each period end. All purchases and sales of financial assets are recorded on the transaction date, which is the day on which the group commits to purchase or sale the asset. Such purchases and sales normally require delivery within the period determined by regulation or market custom. Financial assets at fair value through the balance sheet In accordance with IFRS 7, Polygon is disclosing information about financial instruments accounted for at fair value in the balance sheet, in a fair value hierarchy in three levels. Level one consists of instruments that are listed on an active market where identical instruments are traded. Level two consists of instruments that are not listed on an active market, but where observable market data are used as a basis for valuation of these instrument (either direct or indirect). Level three consists of instruments where the valuation mainly is based on nonobservable market data. The assessments have been done based on the circumstances and facts that are applicable to the different instruments. Currency forward instruments and interest swaps are classified to level two since there are observable market data that can be used for the valuation. Earn-out payments have been classified to level three since there are no observable market data to apply. Loan receivables and accounts receivables Loan receivables are initially recognized at fair value and are subject to regular and systematic analysis in order to determine the amount of receivables that are expected to be received. If a loan receivable is estimated as doubtful, the group accrues the difference between carrying amount and expected cash flow. Interest incomes concerning loan receivables are included in the financial income. Accounts receivables are initially recognized at fair value. Doubtful receivables are accrued at period end when objective evidence shows that the full value of the receivable will not be received. Losses related to doubtful receivables are recorded in the income statement as other operating expenses. See note Polygon group s cash and bank balances, accounts receivables, and some other short-term and interest-bearing receivables are recorded in this category. Cash and bank balances Cash and short-term bank balances in the balance sheet consist of cash equivalents and available cash as well as shortterm bank balances with a due date of three months or less. Financial liabilities The financial liabilities of the group are divided into two categories: Financial liabilities at fair value through profit and loss. Financial liabilities held to trade. Financial liabilities initially recognized at fair value ( fair value option ). Financial liabilities valued at amortized cost. Financial liabilities at fair value through profit and loss Some of the Group s acquisitions include earn-outs. These are recognized as a financial liability at fair value through profit or loss. Financial liabilities valued at amortized cost Liabilities are initially recognized at fair value, with allowance of transaction costs. In the following periods these liabilities are recognized at amortized cost in accordance with the effective interest method. Charges paid regarding commitment fees are recorded as transaction costs and are allocated to the current duration of the commitment in the income statement. In cases where quoted information/data is not available in order to recognize financial instruments at fair value, accepted valuation methods which more or less can be dependent on quoted information/data are used. In some cases, valuation methods based on the company s own assumptions and estimations are used. The fair value of the financial assets and liabilities is assumed to be its nominal value concerning those assets and liabilities with a duration less than a year. The fair value of the financial liabilities consists of discounted cash flows. The discounting is done to the same interest rate that is available to the Group for similar financial instruments. In the present situation, Polygon AB has not any financial derivatives. Acquisition and sales of financial instruments are recorded on the trading day, which is the day on which the group commits to purchase or sale the financial instrument. The accounting of financial instruments expires when the right of receiving or paying cash flow related to the financial instruments no longer exists or has been assigned, and when the group has explicit transferred all risks, allocations and obligations attributable to a possession of financial assets or liability. Financial derivatives and hedge accounting Financial derivatives are valued initially and continuously at their fair value. Changes in value are recognized through profit for the year if they do not make up a part of an effective hedging relationship and hedge accounting is employed. Once a derivative contract has been entered, the Group chooses to classify the derivatives as either fair value hedge, cash flow hedge or hedge of net investment in foreign subsidiaries. If a fair value hedge exists and the criteria s of IAS 39 is fulfilled, the change in value shall be recognized in profit or loss together with change in value on the hedged item in the balance sheet. Changes in value for hedging instruments comprising a 14

15 part of an effective cash flow hedge or a hedge of foreign subsidiaries are recognized as other comprehensive income. The accumulated change in value for this type of derivative is recycled via profit and loss for the period in which the hedged item influences the income statement items. When a hedged instrument is sold, matures, is used or repaid or no longer fulfils the requirement for hedge accounting in any other manner, any gain or loss which has been attributed to equity (via comprehensive income) until that time remains there, to be ultimately recognized as an adjustment of costs or income when the planned transaction or the measures carried out are realized in the income statement. If a planned transaction or an assumed obligation is no longer expected to take place, the accumulated gain or loss shall be attributed to other comprehensive income for the period for which the hedging applied, immediately being transferred to the income statement. Impairment of financial assets An assessment is made at each period end to identify circumstances that indicate the need of impairment on a financial asset. This type of write-down is recognized in the income statement. Provisions A provision is recognized when the Group has an obligation, legal or constructive, as a result of historic events and where it is probable that a payment will be demanded in order to complete the obligation and that its value can be measured reliably. When the company expects that a provision already made will be compensated by an external party, e.g. under the framework of an insurance agreement, this will be recognized as a separate asset, but only once it is virtually certain that the compensation will be received. If the time value is significant, a present value computation of the future payment is performed. The calculation is made using a discount rate that reflects the short term market expectations, taking into consideration the specific risks of the transaction. Continual capitalisation of the provision is recognized in the income statement. A provision for restructuring reserves is recognized over the period in which the Group is legally or constructively bound to the plan. Provisions are only recognized for the costs that arise as a direct effect of the restructuring and which are a result of the remaining contractual obligations without long-term economic benefit or which constitute a penalty as a result of the termination of the obligation. Provisions are reconsidered at each period end. Employee Benefits There are defined benefit plans and defined contribution plans, as well as other long-term remunerations in the group. The provisions for the defined benefit plans are calculated with the Projected Unit Credit Method. Besides considerations of pensions and legally required rights, which are known at closing day, cautious assumptions regarding expected increases of pensions and salaries, as well as other significant parts is considered. The calculation is based on actuarial methods. Actuarial profits and losses of defined benefit plans are recorded in other comprehensive income. Estimated pension costs regarding earlier periods of service are determined when a defined benefit plan is adjusted. These adjustments are recorded as profit or loss, while other pension costs are distributed over the remaining pensionable income period. The total net commitment regarding all plans is recorded in the group s balance sheet after adjustments of costs connected to earlier periods that have not yet been distributed over the correct period of time. The net commitment is divided into a short-term part and a long-term part. The group s contribution to defined contribution plans is charged to the income statement during the year they are attributable to. Leasing contracts When a contract is classified as financial lease, an asset is recognized in the balance sheet as a receivable at an amount equal to the net investment in the lease. In terms of a financial lease, an asset and liability equal to the fair value of the leased property, or, if lower, the present value of the minimum lease payments is recognized in the statement of financial position. Lease payments are apportioned between the finance charge and amortization of the outstanding liability. Recorded financial leasing contracts are depreciated over the expected useful life. Leasing contracts where the lessor maintains all risks and benefits of the ownership is classified as an operating lease. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. Segment reporting The Polygon group comprises three different segments. The segments are identified based on geographical spread. The segments are regularly evaluated by the group CEO, who is the chief operating decision maker (CODM). The segments are responsible for operating income and the net assets that are used within the segment while net financial items, taxes, funding and equity are not reported per segment. Operating earnings and net assets are consolidated in the same way within the segment as is done for the whole group. The segment consists of a group of separate companies. Operating expenses that are not part of the segments are presented under the heading Shared and comprise group functions including group management and central staffs. Sales between the segments are made to market prices and arm lengths condition. Revenue Revenues are generated from sales of services. Revenue in the operating activities of the group are measured at the fair value of the consideration received or receivable, with consideration of current payment terms, excluding taxes and fees. Revenue from the sale of goods or services is recognized when it is probable that the economic benefits associated with the transaction will flow to the group and the revenue can be determined in a reliable way. This moment regularly coincides with invoicing of delivered services. Partial payment or advances from customers is recognized as revenue only when they refer to already executed services. When the outcome of a project involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognized by reference to the stage of comple- 15

16 tion of the projects at the end of the reporting period. The stage of completion is normally measured as the proportion of costs incurred to date in relation to the estimated total costs of the project. If a reliable estimation of stage of completion cannot be made, revenue is not recognized until the project is finished. The same goes for smaller projects. In loss projects where it is not likely that the customer will compensate Polygon for rendered services, the loss is recognized immediately. Other operating income, besides exchange profit on accounts receivable and accounts payable, consists of capital gains on sold tangible fixed assets. Financial income is distributed over a period of time with the effective interest method. In Norway, the Group has agreements with franchisees in which Polygon receives a commission on the sale to the end customer. Polygon issues an invoice for the entire amount to the end customer and receives an invoice from the franchisee for services rendered. The difference corresponds to the Commission. These transactions are reported net of sales revenue, i.e. the commission is reported as sales revenue. Income tax Current income tax Current prepaid tax and income tax liabilities concerning present and previous periods are determined according to the amount which is expected to be reimbursed or paid to the tax authorities. The applied tax rates and tax laws that are used to calculate the amount are the ones approved or announced on the reporting date. Current income tax related to items recorded in equity and in other comprehensive income is recorded in equity and in other comprehensive income and not in the income statement. Deferred income tax Deferred tax is recorded at reporting date in accordance with the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recorded on all taxable temporary differences except when the deferred tax liability arises as a result of a write-down of goodwill or when an asset or liability is recorded as a part of a transaction that is not an acquisition and, at the time of the transaction, affects neither the accounting income nor taxable income or loss, and regarding deductible temporary differences related to investments in subsidiaries, apart from those cases where the time frames of repealing of the temporary difference can be controlled and it is possible that the temporary difference will not turn Deferred tax assets are recorded on all deductible temporary differences, including deficit deduction to the extent that it is possible a taxable income will be available to be used against the deductible temporary differences. The valuation of deferred tax assets should be reviewed on each reporting date and be adjusted to the extent that it is no longer probable that an income will be generated, so that the whole of or a part of the deferred tax asset can be used. Deferred tax assets and liabilities are determined according to those tax rates that are current at the time of the sale of the asset or the payment of the liability, based on tax rates (and legislation) that are enacted or advised at reporting date. Deferred tax assets and liabilities are offset if there is a legal right of offsetting short-term tax assets against short-term tax liabilities and the deferred tax is related to the same entity in the group and the same tax authority. Cash flow statement Cash equivalents consist of available cash, bank balances of disposal at the bank and other liquid investments with an original due date of less than three months. Cash receipts and disbursements are recorded in the cash flow statement. Cash flow from the operating activities is recorded in accordance with the indirect method. Subsequent events Post-balance sheet events, that confirm existing terms at the reporting date, are taken into consideration in connection with valuation of assets and liabilities. Note 2.4 Significant accounting judgments, estimates and assumptions. When the Board and the Managing Director prepare reports in accordance with generally accepted accounting principles, certain estimates and assumptions must be made that affect the values recorded in the final accounts. These assessments and assumptions constitute the basis of the recorded value of assets, liabilities, revenues and expenses in those cases where those cannot be determined through information from other sources. The areas where estimations and assumptions are of considerable importance to the Group are disclosed below: Impairment of intangible assets Intangible assets, except goodwill and intangible assets with an indeterminable useful life, are depreciated over the useful life of the asset. If there are any indications that an asset may be impaired, the recoverable amount of the asset is estimated. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. The recoverable amount is determined by management s estimations of future cash flow. The assumptions that have been made in the impairment test and adherent sensitivity analysis is further explained in note 12. The key assumptions relate primarily to assumptions about future sales growth and profit growth, as well as assumptions about the discount rate. Goodwill and intangible assets with indeterminable useful life are tested for impairment annually and whenever there are signs of impairment. If the recoverable amount of the asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Accounting for sale-and-lease-back transactions A sale-and-lease-back transaction is the sale of an asset and the subsequent lease of that same asset under a lease. The Group made a significant sale-and-lease-back transaction on a property. The Group has determined that the subsequent lease gave rise to an operational lease and therefore immediately 16

17 recognized a gain on the sale in the income statement. Classifications of leases contain a great deal of analysis and estimates, but based on the substance of the transaction, it has been assessed that the agreement is operational in nature and thus recognized as such. Deferred tax assets Deferred taxes are recognized for temporary differences that arise between the taxable value and reported value of assets and liabilities, as well as for unutilized tax-loss carry forwards. A deferred tax asset shall be recognized for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available, against which the unused tax losses and unused tax credits can be utilized. In the event that actual outcome differs from made assumptions, or that management changes these assumptions in the future, the value of the deferred tax assets could be changed. Ongoing work in progress and income The Group applies the percentage of completion method for significant customer contracts. Assessment of total costs is critical to ongoing revenue recognition and provisions for onerous contracts and the outcome of the additional billing may affect the results. Provision for doubtful receivables Trade receivables are recognized initially at fair value and subsequently at their anticipated realizable value, with an estimate being made for doubtful receivables based on an objective review of all outstanding amounts at the year-end. The Group also analyses overdue receivables, and based on this analysis, a provision for bad debts is reported if there is no objective evidence that the payment will be received. Losses relating to doubtful receivables are accounted for as other operating expenses. Pension and other post-retirement benefits Provisions and other post-employment benefits relate to defined benefit plans. These items are dependent on the assumptions actuaries use to calculate such amounts. The assumptions concern discount rates, inflation, salary growth, mortality rates and other factors. These assumptions are updated annually, which will affect the recorded provision. The most significant assumptions relate to the discount rate and future salary increases. The Swedish pension plans use mortgage bonds as the basis for the discount rate. The Group has determined that mortgage bonds are a better approximation of the discount rate than government bonds. Assessments when applying accounting principles When the Board and the Managing Director prepare reports in accordance with generally accepted accounting principles different assessments are conducted, outside of these that contain assumptions, which affect the values recorded in the final accounts. When preparing these financial statements, management s assessment is that no significant boundary question regarding accounting principles exists. Note 3 Business combinations Subsequent Business combinations In January 2015 the English company Harwell Documents Restoration Services Ltd was acquired. Business combinations in 2014 During 2012, the group has acquired the Austrian company Tinkler Bau. The acquisition extends Polygon s range of services within property services. The fair value of the assets and liabilities identified at the time of acquisition is presented below. The acquisition made during the year is not considered to be significant for disclosure requirements in IFRS3R.. For acquisitions of service companies you pay not only for the substance found in the company but also a surplus value, for example to get new customer relationships, knowledgeable, well-trained and experienced employees. The surplus value of the staff, which is not included as an asset of the acquired operations, mainly correspond to the goodwill arising from the Polygon Group together with the anticipated synergies between existing and acquired units Fair value recognised on acquisition Customer relationships - - Trademarks - - Acquired order backlog - - Equipment 10 - Licences - - Other non-current receivables - - Current receivables Long-term loans and other liabilities - - Current liabilities Deferred tax liabilities - - Less: Cash and cash equivalents Total identifiable net assets at fair value 18 - Non-controlling interest measured at fair valu - - Goodwill Purchase consideration transferred Purchase consideration Cash paid Exchange for stock - - Liability to seller Total consideration Analysis of cash flows on acquisition: Net cash acquired with the subsidiary 52 - Cash paid Closing balance

18 Business combinations in 2013 During the year the Group has not acquired any businesses. Additional purchase price has been paid of 200 TEUR. Note 4 Discontinued operations No business has been divested during 2013 or The previously dormant company in Switzerland was finally liquidated in the spring of Note 5 Segment reporting The Group has three segments divided by geographical markets. All segments apply IFRS, just as the Group as whole does Nordic & UK Continental Europ North America Shared Eliminations Group Total Income external customers 133, ,999 37, ,106 Income internal customers Total income 133, ,119 37, ,106 Operating income 3,227-1,970-2, ,098 Net financial items ,524 Taxes ,100 Net income for the year ,522 Depreciations 1,826 6,334 2,101 4,279-14,541 Assets 111, ,733 35,614 64,574-25, ,777 where of GW 44,995 40,675 16, ,588 Liabililties 84, ,861 27, , , ,332 Investments Tangible 3,034 4,318 1, ,180 Intangible ,517-2, Nordic & UK Continental Europé North America Shared Eliminations Group Total Income external customers 129, ,177 39, ,361 Income internal customers Total income 129, ,247 39, ,361 Operating income 5,925-6, ,306 Net financial items ,395 Taxes ,206 Net income for the year ,495 Depreciations 1,852 7,105 2,532 4,611-16,100 Assets 115, ,568 34,820 37,791-25, ,950 where of GW 41,156 44,050 15, ,961 Liabililties 89, ,096 29,522 70,171-80, ,033 Investments Tangible 1,861 3, ,492 Intangible ,019-1,554 18

19 The distribution of net sales on geographical markets is the following: Note 6 Expenses by category Sweden 21,348 20,167 Germany 214, ,443 Other 183, ,751 Total 419, ,361 Payroll expenses 163, ,949 Subcontractor expenses 141, ,799 Other operating expenses 69,072 73,916 Depreciations/ scrapping 14,541 16,155 Other expenses 33,811 38,223 Gains on sales -1,554-1,376 Transaction expenses 15 - Total 420, ,667 Auditors fee Ernst & Young Audit assignment Auditing besides audit assignment Tax consultation 63 9 Other services 9 39 Others Audit assignment Auditing besides audit assignment 8 8 Tax consultation Other services 40 7 Total auditors fees Audit assignment refers to audit of annual report and account records as well as the administration of the board of directors and other audit-related work. Note 7 Wages and salaries to employees and other remuneration and fees Average number of employees per country No of employees Whereof men No of employees Whereof men Sweden % % Norway % % Finland % % Denmark % % Belgium 37 81% 40 85% Austria 78 87% 66 89% Germany 1,234 76% 1,190 76% France 45 84% 44 80% United Kingdom % % Netherlands % % Singapore 4 75% 4 75% USA % % Canada 42 71% 54 78% Total Group 2,912 79% 2,743 80% Salaries and other compensation Salaries and other compensations Payroll overhead (out of which are pensions) Salaries and other compensations Payroll overhead (out of which are pensions) Parent company 2, (509) 1, (282) Subsidiaries 122,336 25,619 (5,358) 114,959 26,283 (4,988) Total Group 124,747 26,907(5,867) 116,228 26,966 (5,270) 19

20 Salaries and other compensation to Board, CEO and other employees. Board and Managing director (of which bonus etc.) 2,559 (27) 1,049 (5) Other employees 149,305 (4,824) 142,460 (4,244) Total Group 151,864 (4,851) 143,509 (4,249) Distribution according to gender within management Distribution of men and women within the Board of Directors Women - 1 Men 4 6 Distribution of men and women regarding CEO and other executives of the Group* Women - - Men 8 12 * The executives within the Group consist 2014 of CEO, CFO, HR Director, Operations Director, Commercial Director and three Country Managers. Compensation to key personnel of the Group Management Sales and other compensations 3,484 3,313 Pension and reimbursement of medical Total 4,004 3,717 Salary to CEO and senior management is determined by the board of directors. Salary level shall be based on market conditions in relation to competence and performance. In addition to fixed annual salary a maximum bonus of 100% of the annual salary could be achieved. The outcome of the bonus is based on the achievement of financial targets. The company has only premium-based pension solutions for senior management. These pension solutions vary between 25% and 35% of fixed annual salary. The notice period regarding termination of the senior management s contract is between six to twelve months irrespective of which party terminates the employment. If the Company terminates the employment the senior management will receive severance pay equivalent to six fixed monthly salaries in addition to the notice period. CEO s notice of period regarding termination is six months and if the Company terminates the employment the period of termination is twelve months. Other benefits include company car or car benefit and healthcare insurance. Note 8 Finance revenue and costs Finance income Interest income - External interest income Other financial income Total financial income Finance costs Interest expense - External interest expenses -10,366-9,280 - Other financial expenses -1,396-3,290 Total finance costs -11,762-12,570 Note 9 Taxes The principal components in terms of tax expense for the financial year which ended on December 31, 2014 are: Consolidated income statem Taxes for the year 1,065 1,058 Adjustments for taxes related to previous year Change of deferred tax related to temporary differences -3,453-4,562 Other Total recognised tax expense in the income statement -2,100-3,206 Reconciliation of effective tax Income before taxes -12,757-13,701 Tax according to current tax rate for Parent Company -2,807-3,074 Difference related to foreign tax rates -1,501-1,518 Non-deductible expenses 1,263 1,754 Non capitalized loss carry forward taxable 1, Tax-exempt income Tax related to previous years Other Total -2,100-3,206 The average effective tax rate amounted to 16.4 (23.3) percent. The average tax rate in the group amounted to around 26%. 20

21 The deferred income taxes are related to the following: Deferred tax assets Intangible assets Plant and machinery Work in projects 6,868 6,355 Accounts receivable Provisions Other liabilities 4 2 Loss carry-forward 13,944 11,240 Provisions for pensions 1, Other Closing balance 22,777 19,734 Deferred tax liability Plant and machinery 1, Work in projects Accounts receivables 7,356 6,104 Intangible assets 14,961 17,596 Other Closing balance 23,919 24,928 Deferred tax receivables regarding unutilized loss carry forwards are recognized to the extent it is probable that they will be utilized against taxable income. The total amount regarding loss carry forwards at year-end was 88,0 (76,7) MEUR. Loss carry forwards that have not been recognized were 48,0 (29,5) MEUR. Accordingly the loss carry forwards of 40,0 (47,2) MEUR are recognized as deferred tax liability. Note 10 Goodwill Opening balance acquisition values 108, ,271 Additions * Reclassifications Exchange rates differnces 1,752-1,087 Closing balance acquisition values 110, ,759 Opening balance impairment -7,798-8,318 Exchange rates differences Closing balance accumulated impairment -8,347-7,798 Net book value closing balance 102, ,961 * See note 3 Business combinations Loss carry forward Due date year 138 1, year year year year - - >5 year 23,274 12,582 No due date 64,051 63,096 Total 87,961 76,721 21

22 Note 11 Intangible assets 2014 Trademark Orderbacklog Customer relations Other Total Opening balance acquisition values 25,637 8,912 39,979 8,170 82,698 Acquisitions ,696 2,696 Sales/ scrapping Reclassification Translation differences Closing balance acquisition values 25,633 8,972 39,991 11,455 86,051 Opening balance depreciation -35-8,912-12,301-3,231-24,479 Deprecation according to plan ,418-1,294-5,747 Sales/ scrapping Reclassification Translation differences Closing balance accumulated depreciation -78-8,972-16,748-4,748-30,545 Opening balance write-downs ,734-1,734 Write-downs Closing balance accumulated write-downs ,734-1,734 Net book value 25,555-23,243 4,973 53, Trademark Orderbacklog Customer relations Other Total Opening balance acquisition values 25,498 9,051 41,046 8,091 83,686 Acquisitions ,554 1,554 Disposals ,708-1,708 Reclassification Translation differences Closing balance acquisition values 25,637 8,912 39,979 8,170 82,698 Opening balance depreciation - -8,625-7,891-2,824-19,340 Deprecation according to plan ,429-1,253-6,087 Disposal Translation differences Closing balance accumulated depreciation -35-8,912-12,302-3,105-24,354 Opening balance write-downs Write-downs ,734-1,734 Closing balance accumulated write-downs ,734-1,734 Net book value 25,602-27,677 3,331 56,610 The income statement includes amortization of 222 (10) of TEUR relating to Cost of sales, 5,449 (5,655) TEUR relating to Selling and Distribution costs and 76 (422) TEUR relating to Other operating costs. 22

23 Note 12 Impairment testing of goodwill and trademarks Goodwill and other intangible assets with indefinite useful life acquired through business combinations are specified in the table below. Polygon has three business segments that represent the cash generating units. The value of goodwill amounts to 102,6 MEUR and the value of other intangible assets amounts to 53,8 MEUR for Polygon Allocation to the different segments: Goodwill Trademarks Nordic & UK 44,995 11,208 Continental Europe 40,675 10,132 North America 16,918 4,215 Total 102,588 25,555 The test of impairment regarding goodwill and trademarks has been performed by a judgement of value in use. This calculation includes several assumptions about future conditions and estimates of parameters. Changes in these assumptions and estimates could have an effect on the goodwill carrying value. The value in use is based on cash flow calculations, where the first five years are based on the five year business case established by corporate management. The cash flows thereafter have a yearly growth rate of 1-2 (1) percent, which is assessed to correspond with the long-term growth of the markets. The discount rate was determined based on the Group's weighted average cost of capital (WACC) based on assumptions about interest on long-term government bonds as well as company-specific risk factor and beta value. The estimated cash flows have been discounted to present value using a discount rate (WACC) in the range 11, (11,5-13,3) percent before tax. The conclusion of the impairment test is that there is no impairment needed because the value in use exceeds the carrying value, including goodwill and other intangible assets. Should the company not be able to reach its business plan, which the cash flow calculations are based on, the need of an impairment could be necessary. Note 13 Property, plant and equipment Property and plant Opening balance acquisition value 2,814 6,512 Investments - 6 Disposals - -1,418 Reclassification - -2,218 Translation differences Closing balance acquisition value 2,805 2,814 Opening balance depreciation 1,166 1,775 Depreciation for the year Disposals Reclassification Translation differences Closing balance accumulated depreciation 1,223 1,166 Carrying amount closing balance 1,582 1,648 Equipment Opening balance acquisition value 110, ,686 Additions due to acquiring of business 10 - Investments 9,180 6,486 Disposals -2,030-1,718 Reclassification ,558 Adjustments Translation differences 1,633-1,982 Closing balance acquisition balance 118, ,030 Opening balance depreciation -83,470-75,961 Depreciation for the year -8,727-9,973 Disposals 673 1,160 Reclassification Adjustments Translation differences ,562 Closing balance accumulated depreciation -92,173-83,470 Opening balance write-down Write-downs Disposals Translation differences -8 2 Closing balance accumulated write-downs Carrying amount closing balance 25,521 25,648 23

24 The income statement includes depreciations amounting to a total of 6,6 (7,7) MEUR relating to cost of goods sold and 1,1 (1,3) MEUR relating to Selling and Distribution costs and 1.1 (1,1) MEUR relating to Other operating costs. Finance lease Assets held under finance leases are recoded as equipment. Current year s total payments regarding these assets amounted to 260 (263) TEUR. The finance lease mainly relates to vehicles. Equipment possessed under finance lease agreements is as follows: Acquisition values Assets held under finance leases Acquisition Accumulated depreciation Translation differences -2-6 Net book value See note 14.6 for liabilities regarding finance lease. Note 14 Financial instruments and financial risk management Financial risk management in Polygon Group Polygon AB is exposed to a number of financial market risks that the Group is responsible for managing under the financial policy approved by the Board of Directors. The overall objective is to have cost-effective funding in Group companies. The financial risks within the Group are mainly handled through weekly exchange of non-euro cash into euros and only to a limited part through financial instruments. The main exposures for the Group are liquidity risk, interest risk and currency risk. The significant financial assets and liabilities are detailed below. Carrying amounts Fair value Carrying amounts Fair value Current assets Accounts receivables 67,705 67,705 68,657 68,657 Other current assets 6,086 6,086 5,110 5,110 Receivables, parent company Cash and cash equivalents 21,509 21,509 15,789 15,789 Total assets 95,371 95,371 89,556 89,556 Liabilities Long-term interest-bearing liabilities 117, ,145 91,394 93,687 Other interest-bearing liabilities 57,754 57,754 54,914 54,914 Short-term interest-bearing liabilities - - 9,637 9,637 Accounts payables 34,168 34,168 33,923 33,923 Other short-term liabilities 10,642 10,642 10,433 10,433 Accrued expenses 9,494 9,494 6,662 6,662 Total liabilities 229, , , ,256 Derivatives for hedging purposes Interest rate derivatives Total Currency risk As a consequence of its international activities Polygon is exposed to changes in foreign exchange rates. Below is the currency exposure of the various financial assets and liabilities presented. Carrying amounts, by currency, regarding the Group s borrowings are the following: EUR 175, ,393 SEK - 2,962 USD - 13,819 NOK GBP 1 - Other currencies 51 7,308 Total 175, ,953 24

25 Currency break-down of Accounts receivables Currency break-down of Other current assets Currency break-down of Cash and Bank Currency break-down of Accounts payables EUR 47,622 51,660 SEK 2,714 2,424 USD 6,030 3,265 NOK 3,038 3,583 GBP 4,925 4,219 Other currencies 3,376 3,508 Total 67,705 68,657 EUR 3,491 1,629 SEK 421 1,357 USD NOK GBP Other currencies Total 6,086 5,110 EUR 25,979 6,393 SEK -3, USD -3, NOK 6,112 7,963 GBP -4,444-1,246 Other currencies 1,256 1,180 Total 21,509 15,789 EUR 19,209 22,445 SEK 1,153 1,841 USD 5,688 2,644 NOK 1,607 1,106 GBP 5,093 3,496 Other currencies 1,419 2,391 Total 34,168 33,923 Currency break-down of Other short-term liabilities EUR 7,615 7,229 SEK USD NOK 1,218 1,346 GBP Other currencies Total 10,642 10,913 Currency break-down of Accrued expenses EUR 5,926 3,997 SEK USD 1, NOK GBP 883 1,144 Other currencies Total 9,494 6,662 Transaction exposure Polygon s policy for transaction exposure is to minimize the impact of short-term changes in foreign exchange rates on earnings by: on a case by case basis hedging the transaction exposure denominating intra-group sales according to the Group policy The main transaction exposures are EUR versus local currencies. Translation exposure Polygon s assets in foreign Subsidiaries are partly financed by loans and partly by equity capital. If foreign assets are being financed with equity capital, a translation currency exposure exists in connection with consolidation of the balance sheet. Translation exposure causes a risk that changes in foreign exchange rates will have a negative impact on the value of Polygon s net assets in foreign currency. The translation risk is an accounting risk that arises when Polygon s accounts are consolidated, as an effect on consolidated equity capital. Transaction risk and hedges in main currencies Polygon currently has no outstanding hedges of Transaction exposure. Interest Rate Risk Fluctuations in interest rates affect the interest expense of the Group. Polygon s interest rate risk policy is designed to reduce the impact of interest-rate changes on earnings. In the case of interest-bearing assets, the fixed interest-rate period shall be short and matched against amortizations of loans. At the close of the year Polygon uses had no interest hedging in the form of interest rate swaps or interest rate caps. As of 31 December 2014, a one percentage point parallel change up or down in interest rates impacts annual net interest expenses by 1,2 (0,5) MEUR, assuming that the duration and the funding structure of the Group stays constant during the year. The total Group floating rate interest-bearing net liability position, excluding cash and cash equivalents, were some 151,1 (111,2) MEUR. Note 14.1 Financial Instruments summarizes the nominal and fair values of the outstanding interest rate derivative contracts. 25

26 Customer credit risk Credit insurance has been obtained for customers within the group. In addition, measures to reduce credit risks include letters of credit, prepayments and bank guarantees. Management considers that no significant concentration of credit risk with any individual customer, counterparty or geographical region exists for Polygon. The Age Analysis of Trade Receivables is given in Note 14.3 Receivables. Liquidity and refinancing risk Funding risk arises from the difficulty of obtaining finance for operations at a given point in time. Polygon s funding policy states that the Group s external loan portfolio shall have a maturity structure ensuring that Polygon is not exposed to refinancing risks. Polygon is also subject to some covenants (terms and conditions) stated in the Senior Secured Floating Rate Note and in the overdraft facilities, such as indicators and performance measures linked to the Group's consolidated income statement and balance sheet. Capital risk management The Group's capital structure should be maintained at a level that ensures the ability to run the business to generate returns for shareholders and benefits for other stakeholders, while maintaining an optimal capital structure to reduce capital costs. To maintain or adjust the capital structure, the Group could, after shareholder and external lender approval, vary the dividend paid to shareholders, reduce the share capital for payment to shareholders, issue new shares or sell assets to reduce debt. The Group analyses the relationship between debt and equity and the relationship between debt and equity, including loans from shareholders and the seller based on performance objectives. Outcomes in the table below are within the targets set. TEUR Interest-bearing net liabilities (A) 96,133 85,250 Total equity (B) 42,445 53,918 Relation between liabilities and equity (A/B) Group financing TEUR Interest-bearing net liabilities including loans from parent company (A) 153, ,164 Total equity (B) 42,445 53,918 Relation between liabilities and equity (A/B) Note 14.1Interest-bearing loans and borrowings The Group s interest-bearing loans and borrowings are presented below. * Finance costs will be amortized over the duration of the loans. Maturity of financial liabilities is as follows: Non-current: rate) - 27,213 Bank loans (floating interest 120,043 66,186 Capitalized finance costs* -2,502-2,775 liabilities 57,856 55,684 Total non-current liabilities 175, ,308 Current: Other bank loans - 14 Bank loans (short-term) - 9,623 Total current liabilities - 9,637 Amount of borrowings 175, ,945 Undiscounted Book value cash flow Within 1 year 53,017 60,655 62,211 68,314 years 117,643 91, , ,032 After 5 years 57,754 54, , ,844 Total 228, , , ,190 Financial liabilities are included in book value amounts above. In the discounted cash flow amounts both financial liabilities and payment of interest are included. All amounts in other currency than EUR is revaluated at closing rate and payment of interest for loan with variable rate has been calculated with the rate on closing day. The weighted average interest rate on external loans and borrowings, including margins and the effect of derivatives, was per December 31, % (5.17%). 26

27 Financial assets and liabilities by valuation category: Derivatives used in hedge Aquisition 2014 accounting earn-outs Valuation category Level 2 Level 3 ASSETS Current assets Total reported value Fair value Other short-term assets Total financial assets LIABILITIES Long-term liabilities Other short-term liabilities Current liabilities Other short-term liabilities Total financial liabilities Derivatives used in hedge Aquisition 2013 accounting earn-outs Valuation category Level 2 Level 3 ASSETS Total reported value Fair value The Group categorizes financial assets and financial liabilities that is valued at fair value in a fair value-hierarchy based on the information that is used to value each asset and liability. Level 1 Listed prices for identical assets or liabilities on an active market. Level 2 Listed prices on markets that are non-active, listed prices for similar assets or liabilities, other information than listed prices that are observable direct or indirect for mainly the instrument s whole duration as well as input to valuation models that have been collected from observable market data. Level 3 Information that is essential for the asset or liability fair value is not observable so the Group s own assessments are applied. The fair value of derivate regarding interest is based on a discounting of estimated future cash flow according to the contract conditions and due dates starting in market rate. Derivate regarding interest is covered by an ISDA contract that enables offsetting failure of either party. On balance date there is only a liability. Financial liabilities in level 3 consist of acquisition earn-outs for acquired business. Valuation is based on the acquired business expected future financial performance which has been assessed by the management. Financial assets - - Opening balance - 48 Change during the year Closing balance Financial liabilities - - Opening balance 986 3,678 Change acquisition earn-out ,607 Change marke value interest hedge ,085 Closing balance Current assets Other short-term assets Total financial assets LIABILITIES Long-term liabilities Other short-term liabilities Current liabilities Other short-term liabilities Total financial liabilities Note 14.2 Cash and cash equivalents As December 31, 2014 the Group had available 31.9 MEUR (25.0) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. Note 14.3 Accounts receivables Cash at banks and on hand 21,509 15,789 Total 21,509 15,789 Accounts receivables 71,047 71,554 Provision for doubtful receivables -3,342-2,897 Total 67,705 68,657 No collateral (pledge) for receivables has been received. 27

28 Age analysis of receivables Provision for doubtful receivables 2014 Overdue receivables Overdue receivables - provisions recognized Overdue receivables - no provisions recognized Opening balance 2,897 3,917 Current year provision Less than 30 days overdue 17,876-17, to 60 days overdue 5,547-5, to 90 days överdue 1,873-1, to 180 days overdue 3,354-3,354 Over 181 days överdue 4,133 3, Total overdue accounts 32,782 3,342 29,440 Accounts receivables within their credit terms 38,265-38,265 Total 71,047 3,342 67,705 Utilized receivables Recovered bad debt Exchange rate differences Closing balance 3,342 2,897 Note 14.4 Prepaid expenses and accrued income Prepaid insurance Prepaid rent Prepaid service 1, Leasing Other prepaid expenses and accrued income 1,351 2,136 Total 4,068 3, Overdue receivables Overdue receivables - provisions recognized Overdue receivables - no provisions recognized Note 14.5 Pledged assets for own liabilities and provisions Less than 30 days overdue 19,811-19, to 60 days overdue 6,994-6, to 90 days överdue 3,987-3, to 180 days overdue 5,605-5,605 Over 181 days överdue 3,095 2, Total overdue accounts 39,492 2,897 36,595 Accounts receivables within their credit terms 32,062-32,062 Total 71,554 2,897 68,657 As stated in note 14.5 all shares in the main subsidiaries in the Group are pledged as security for loans in financial institutes. In addition the subsidiaries have pledged real estate- and chattel mortgages for the same loan facility. The amount stated under pledged assets are therefore equal to total assets in the pledged subsidiaries. Note 14.6 Financial lease liabilities Shares in subsidiaries 191, ,636 Floating charge 88,506 88,505 Other - 8,832 Pledged assets for own liabilities and provisions 279, ,973 Finance leases mainly consist of service vehicles that are used in the operations. The minimum lease payments consist of a capital part and an interest part that is variable and is based on the marker interest rate in each country. 28

29 Minimum lease payments Minimum lease payments Present value of finance lease liabilities Discount rate used to calculate present value is 6%. Note 14.7 Operational lease contracts Less than 1 year years years years years 5 - More than 5 years - - Future finance charges Less than 1 year years years years years 4 - More than 5 years - - Total Operational lease contracts consist of facilities, service vehicles and computers and office equipment. These contracts have an average contract period of 1 to 5 years without an option to buy the equipment at the end of the lease term. No restrictions on Group exist following the assumptions. Leasing costs during the year have been 21,3 (18,9) MEUR. Note 14.8 Other liabilities Note 15 Issued capital Less than 1 year 17,161 18, years 11,619 17, years 7,177 11, years 4,299 7, years 3,017 4,734 More than 5 years 9,077 14,811 Future finance charges 52,350 55,687 VAT 6,609 6,621 Employee withholding taxes 2,583 2,844 Other liabilities 1,450 1,448 Total 10,642 10,913 Issued capital Each share has a par value of EUR 1 per share. All shares are of the same class and have equal voting rights. All shares are fully paid. All shares carry equal rights to its assets and profits. There are no restrictions on the transferability of shares by operation of law or the articles of association. During 2014 the company made a bonus issue of 52 TEUR. Other contributed capital Refers to equity contributed by shareholders. This includes share premium. Change in reserves within accumulated Other comprehensive income TEUR Hedging reserve Translatsion reserve Actuarial gains/ losses on Defined benefit plans Closing balance as of December 31, Current years s translation difference in foreign operations Actuarial gains/ losses Change of market value on cashflow hedges taken over net income Taxes referred to items within Other comprehensive income Closing balance as of December 31, Current years s translation difference in foreign operations Actuarial gains/ losses ,989 Change of market value on cashflow hedges taken over net income Taxes referred to items within Other comprehensive income Closing balance as of December 31, ,404 Hedging reserve The hedging reserve refers to accumulated changes of market value on cash flow hedges referred to hedging of exchange rate fluctuations and interest risks. Translation reserve The translation reserve covers all translation differences that occur when recalculating financial reports from foreign operations that have been established in a different currency than the currency that is used for the Groups financial reports. The 29

30 parent company and the Group present their financial reports in euros. Actuarial gains/losses See information note 16. Note 16 Pension provisions The Polygon Group finances pension plans for its employees in a number of countries. The plans generally conform to praxis in respective country and may take the form of defined contribution plans, defined benefit plans or a combination of both. The defined contribution plans mainly includes retirement pensions, disability pensions and survivor pensions. The contributions are paid during the year from the respective group company to separate legal entities, e.g. insurance companies. The Group has no further commitments once the contributions have been paid. The defined benefit plans mainly include employees in Sweden, Norway and the United Kingdom. The pension plans are all based on final salary, and provide benefits in the form of a guaranteed level of pension payments to the plan participants during their lifetime. The pension plan in the UK is funded and also includes a defined contribution complement. The pension plan is closed, which means that no current service costs are added to this plan. Some of the plan assets are not recognized, as surplus in the plan is not available for the employer neither in the form of reductions of future contributions or as cash refunds (asset ceiling). The plan assets are exposed to market risks, among other risks. The Norwegian pension plan is funded in an insurance company. The Polygon Group guarantees a pension benefit based on final salary, while the insurance company guarantees an interest between 3% and 4% depending on the duration of the pension obligation. This guaranteed interest is not dependent upon the insurance company's actual return. The pension plan's major risk is that of increased longevity. The Swedish pension plan consists of the collectively agreed ITP-plan. This plan includes both defined contributions and defined benefit pensions. The defined benefit obligation is ensured through recognition in the balance sheet, combined with credit insurance in PRI Pensionsgaranti. The pension plan exposes the Group for risks associated with e.g. increased longevity and inflation as well as raised salaries. In France, Germany and Norway there are unfunded pension obligations of insignificant amounts. The present value of the Group's defined pension obligations is mainly impacted by changes in the discount rate. The Polygon Group accounted for the impact of the revised accounting principles according to IAS 19 in the consolidated financial statements of 2012, by including the special payroll tax in the defined benefit obligation and the pension expenses. The other revised accounting principles have an insignificant impact and no additional restatements have been made regarding the comparative year The Polygon Group already accounts for re-measurements of defined benefit plans in Other Comprehensive Income. The tables below summarize the components of the net cost for pensions that are recognized in the Income statement and in Other Comprehensive Income, as well as the changes of the net defined pension liability as recognized in the balance sheet. Summary of pension provisions in the Group Long -term defined benefit liability 5,624 4,895 Net liability recognized in the Balance sheet 5,624 4,895 Pension expenses Amounts recognized in the invome statement Current service cost Net interest Expected return on plan assets Expenses, defined benefit plans Expenses, defined contribution plans 6,526 5,046 Amounts recognized in Other Comprehensive Income Remeasure of pension obligation 2, Remeasure of plan assets Remeasurement of asset ceiling Expenses/ (income), defined benefit 1, plans - - Total pension expenses 8,053 5,067 Amount recognized in the Balance sheet Fair value of defined benefit obligation, funded plans 4,857 7,978 Fari value of plan assets -3,696-6,737 Effect of asset ceiling - 80 Net liability recognized in the Balance sheet 1,161 1,321 Present value of defined benefit obligation, unfunded plans 4,463 3,574 Net liability recognized in the Balance sh 5,624 4,895 Change in amount recognized in the Balance sheet Opening balance, net liability 4,895 5,757 Reclassification of special payroll tax Current service cost Net interest Remeasurements 1, Pension payments directy from employer Employer s contribution to the pension plan assets Effect of changes in foreign exchange rates Closing balance, net liability 5,624 4,895 30

31 Change in present value of defined benefit obligation Opening balance, defined benefit obligation 11,551 12,647 Reclassification of special payroll tax Current service cost Interest expenses Settlement -4,444 - Remeasurements of pension obligation =- demographic assumptions =- financial assumptions 2, experience adjustments Pension payments Effect of changes in foreign exchange rates Closing balance, defined benefit obligation 9,322 11,551 Change in fair value of plan assets Opening balance, plan assets 6,737 6,890 Interest income Return excluding interest income Employer s contribution Pension payments from plan assets Settlements -3,585 - Effect in changes in foreign exchange rates Closing balance, plan assets 3,696 6, Defined benefit obligation Plan assets Assets ceiling Net liability Break-down per country United Kingdom, funded plan 4,802 3,696-1,106 Norway, funded plan Sweden, unfunded plan 4, ,079 Other countries, unfunded plans* Total 9,322 3,696-5,626 * France, Germany, Norway The most significant actuarial assumptions which have been used to determine the pension obligations for the Group's significant defined benefit pension plans are: Significant actuarial assumptions Norway Discount rate 2,6% 4,0% Expected return on assets 1,8% 2,0% Future wage increase 3,5% 3,7% Furute pension increase 0,4% 0,6% Fair value of plan assets Equities 73% 38% Bonds 20% 28% Real estate 0% 5% Other, including cash and cash equivalents 7% 29% Total 100% 100% All plan assets are assets with a quoted market price in an active market. None of the plan assets are invested in the Group s own equity instruments, debt instruments, real estate, or other assets or used by the Group. Change in asset ceiling ceiling Interest cost -4 - Changes in asset ceiling, excluding interest cost Effect of changes in foreign exchange rates -3-1 Closing balance, asset ceiling United Kingdom Discount rate 3,5% 4,3% Expected return on assets 2,2% 2,4% Future wage increase N/A N/A Furute pension increase N/A N/A Sweden Discount rate 2,6% 4,0% Expected return on assets 1,6% 2,0% Future wage increase 2,6% 3,0% Furute pension increase 1,6% 2,0% The assumption of longevity is based on official statistics and experiences from longevity surveys in respective country and is decided after consultation with actuarial expertise. The discount rate is determined with reference to high quality corporate bonds traded in a deep market, reflecting the duration of the pension obligation. In Sweden, the discount rate is based on covered mortgage-backed bonds. An increase of the discount rate by 0.5 percentage points would decrease the pension obligation by 808 TEUR, equivalent to a decrease of the obligation amounting to 8,7%. A decrease of the discount rate by 0.5 percentage points would increase the pension obligation by 915 TEUR, equivalent to a decrease of the obligation amounting to 9,5%. The sensitivity analysis is based on a change in one single actuarial assumption while the other assumptions remain un- 31

32 changed. This method shows the obligation s sensitivity to one single assumption. This is a simplified method as most often the actuarial assumptions are correlated. The weighted average duration of the defined benefit obligation is approximately 16 years. The Group s expected contributions to the pension plans, including pension payments directly from the employer, for the next annual reporting period amounts to 613 TEUR (548). Not 17 Accrued expenses and prepaid income Note 18 Contingent liabilities There are no contingent liabilities within the Group. Note 19 Related parties disclosures Accrued salary-related expenses 7,128 5,793 Accrued vacation pay 7,948 7,894 Accrued non-received invoices 2,948 1,966 Accrued audit expenses Accrued interest expenses 1, Ohter accrued expenses and prepaid income 4,899 4,143 Total 24,570 20,349 The Group is controlled by Polygon Holding AB, the mother company of Polygon AB. Polygon Holding AB is controlled by Triton Fund III, which direct and indirect controls 89.02% of the shares in the Polygon group. No essential transactions exist with companies in which Triton Fund III has a significant or controlling influence. Payment for services rendered and disbursements of 799 (64) TEUR has been made to West Park Management Services and Triton Advisers (UK) Ltd. No group contribution or dividend has been conveyed to Polygon Holding AB. Country % Share of captial Company name Polygon International AB Sverige 100,0% Polygon Norway Holding AS Norway 100,0% Polygon AS Norway 100,0% Polygon A/S Denmark 75,8% Polygon Nederland Holding BV Holland 100,0% Polygon Belgium NV Belgium 100,0% Polygon Nederland BV Holland 100,0% Polygon Sverige AB Sweden 100,0% AK-Konsult Indoor AB Sweden 100,0% PolygonVatro GmbH Germany 100,0% Polygon Austria Service GmbH Austria 100,0% Tinkler Bau Austria 100,0% Polygon Canada Inc Canada 100,0% Polygon France SAS France 100,0% Polygon Service Pte Ltd Singapore 100,0% Polygon UK Holding Ltd United Kingdom 100,0% R3 Polygon UK Ltd United Kingdom 100,0% Polygon US Corporation USA 100,0% Polygon Finland Holding Oy Finland 100,0% Polygon Finland Oy Finland 100,0% Note 20 Adjustments to reconcile profit before tax to net cash flow Non-affecting cash-flow: Depreciation and impairment of non-tangible assets 5,747 6,110 Depreciation of tangible assets 8,794 10,045 Capital gains from disposal fo fixed assets -23-1,564 Disposal/ scrapping of nontangible assets 174 5,250 Change of pension liability Changes in provisions and other Total 15,319 19,612 Note 21 Events after the reporting period As of 12 January 2015 Lucas Hendriks assumed the position of Chairman of the Board. A minor acquisition was made in England in January 2015 In the judgment of the company no other essential events have occurred after the closing date. 32

33 Parent company s financial reports Income statement T Note Sales 2 5,234 3,368 Gross profit 5,234 3,368 General administration and sale expenses 3.4-2,990-2,629 Other operating costs 5-1, Operting income Income from shares in Group companies 1,000 1,791 Finance income 6 4,747 - Finance costs 6-4,903-1,153 Income (loss) after financial items, net 1, Group contribution 5,320 1,300 Income (loss) before income taxes 6,507 2,237 Income taxes Net income 6,507 2,237 Statement of Total Comprehensive income T Note Net income 6,507 2,237 Comprehensive income 6,507 2,237 33

34 Statement of financial position Note ASSETS Noncurrent assets Nonrurrent financial assets Participations in Group compamies 8 76,296 76,296 Receivables from Group companies, interest-bearing 9 117,950 - Total noncurrent assets 194,246 76,296 Current assets Current receivables Receivables, parent company ,300 Current income tax Other receivables 15 - Prepaid expenses Receivables, Group companies 20,216 10,438 Total current receivables 20,356 11,869 Cahs and cash equivalents - - Total current assets 20,356 11,869 TOTAL ASSETS 214,602 88,165 T Note EQUITY AND LIABILITIES Restricted equity Share capital(5,600 shares at par value 1 EUR) 58 6 Non restricted equity Other contributed capital 6,771 6,771 Retained earnings 86,709 80,254 Total Equity 93,538 87,031 Long-term liabilities Long-term financial liabilities, interest-bearing 117,699 - Total long-term liabilities 117,699 - Current liabilities Accounts payables Current liabilities, Group companies Other current liabilities Accrued costs 10 2, Total current liabilities 3,365 1,134 TOTAL EQUITY AND LIABILITIES 214,602 88,165 Pledged assets and contingent liabilities T Note Pledged assets 11 Shares in subsidiaries 76,296 76,296 Total assets pledged 76,296 76,296 Contingent liabiliities None None 34

35 Cash flow statement T Note Operating activities Income (loss) before taxes Financial income received 4,747 - Income tax paid Cash flow from operating activities prior changes in working capital 5, Change in working capital Change in other receivables -2, Changes in other liabilities 2, Cash flow used in operating activities 4, Cash flow from financing activities Increase in loans 120,000 - Change of receivables Group comapnies -121,982-1,527 Dividend from Group comapnies 1,000 1,791 Capital contribution 5,320 1,300 Financial cost paid -4, Cash flow from financial activities Cash flow from the year 4, Cash and cash equivalents at the beginning of the year 10,211 9,325 Cash and cash equivalents at the end of the year 14,537 10,211 Changes in equity T Share capital Share premium Retained earnings Total equity Closing balance per 31 December ,487 20,264 Share premium , ,874 Net income (loss) ,893-8,893 Closing balance per 31 December , ,245 Dividend ,451-52,451 Net income (loss) - - 2,237 2,237 Closing balance per 31 December ,254 87,031 Bonus issue Net income (loss) - - 6,507 6,507 Closing balance per 31 December ,709 93,538 35

36 Notes Note 1 Basis of preparation Rules and regulations applied The Consolidated Financial Statement has been prepared in accordance with the Annual Accounts Act and RFR 2 Supplementary Rules for Groups. Deviation in principles between the parent company and the group are presented below. The bank accounts in the mother company are not in the balance sheet presented as Cash and Cash equivalents since they are part of the group s cash pool. In the Cash flow statement though, the bank accounts are presented as Cash. Financial assets In the parent company the financial assets are valued to the lowest of acquisition value and recoverable amount. Recoverable amount is the highest of net selling price and value in use. Value in use consists of the present value of estimated future net cash flows. In case the recoverable amount is less than book value a write-down is made to the recoverable amount. A write-up is made when an asset is judged to have a reliable and permanent value that materially exceeds book value, this in accordance with the Annual Accounts Act. Participation in subsidiaries Shares in subsidiaries are valued at cost. All dividends received are accounted for in the income statement. Group contributions and owners contribution The recipient accounts for owner s contribution directly in equity. In the case of the contributor the contribution is added to Participations in Group companies, if there is not a case of impairment. Received and Group contributions paid are accounted for in income statement within appropriations. Note 2 Distribution of sales Polygon AB has had no external sales in the period. All income is inter-company. Note 3 Wages and salaries to employees and other remuneration fees Only the CEO, CFO, HR Director, Operations Director and Commercial Director are employed by the parent company. Wages and salaries and other remuneration fees to management are described in note 7 for the Group. Note 4 Audit fee Audit assignment (EY) Other assignments (EY) Total Audit assignments involve examination of the annual report and financial accounting as well as the administration by the Board and other tasks related to the duties of the company s auditors. Note 5 Other operating costs Currency exchange gains/ losses Project costs -1, Total -1, Note 6 Financial income and expenses Interest income and other similar transactions Interest income, internal 4,747 - Total 4,747 - Interest cost and other similar transactions Interest cost, external -4,883-1 Interest cost, internal Exchange rate differences -2 - Oterh financial expenses -15-1,135 Total -4,903-1,153 Note 7 Taxes Income before taxes 6,507 2,277 Tax according to current tax rate for Parent company 1, Non-deductible expenses Used not earlier accounted loss carry forward -1, Tax-exempt income Total 0 0 Note 8 Participation in Group Companies Polygon International AB, share of capital and voting rights 100% 74,253 74,253 Polygon Finland Holding Oy, share of capital and voting rights 100% 2,043 2,043 Net carrying value closing balance 76,296 76,296 36

37 Note 9 Long-term Receivables Group companies Polygon International AB 104,193 - Polygon Finland Holding Oy 13,757 - Total 117,950 - Note 10 Accrued expenses and prepaid income Accrued rent expenses 1,287 - Pension related expenses Other accrued expenses Total 2, Note 11 Pledged assets All shares in the group s major subsidiaries are pledged as security for loan from financial institutes. Furthermore, the group has issued real estate and company mortgages for the same loan facility. Note 20 Related parties disclosures Polygon AB is owned by Polygon Holding AB, Polygon Holding AB is controlled by Triton Fund III, which direct and indirect controls 89.02% of the shares in the Polygon group. No essential transactions exist with companies in which Triton Fund III has a significant or controlling influence. Payment for services rendered and disbursements of 799 (64) TEUR has been made to West Park Management Services and Triton Advisers (UK) Ltd. Polygon AB has received 1,0 (1,8) MEUR in dividend from Polygon Finland Holding Oy and 5,3 (0) MEUR in group contribution from the daughter company Polygon International AB. No group contribution or dividend has been conveyed to Polygon Holding AB. 37

38 The Board and Chief Executive Officer s signatures Stockholm Lucas Hendriks Per Agebäck /Chairman/ / Board member / Torbjörn Torell Jonas Samuelson / Board member / / Board member / Evert Jan Jansen / Chief Executive Officer / Our audit report was submitted on Ernst & Young AB Rickard Andersson / Authorized Public Accountant / 38